Question

Return On Investment Only.
Plz explain how we get 16.48%.
Use ROI=Profit before Interest and tax/Capital Employed X 100​

Answer 1

Return On Investment = 16.48 %

Explanation:

Fixed assets = Rs 75,00,000

Current assets = Rs 40,00,000

Current liabilities = Rs 27,00,000

12 % Debentures = Rs 80,00,000

Net Profit before interest, Tax and Dividend = Rs 14,50,000

Solution :

★ Calculate Return On Investment :

• ROI = Profit before Interest, Tax Dividend / Capital Employed X 100

• Return On Investment =

$\sf{\frac{Net \: Profit \: Before \: Interest, \: Tax \: And \: Dividend}{Capital \: Employed}\times 100}$

Capital Employed = (Fixed assets + Current assets) - Current liabilities

⇒ (75,00,000 + 40,00,000) - 27,00,000

⇒ 11,500,000 - 27,00,000

⇒ 88,00,000

Capital Employed = 88,00,000

Return On Investment =

⇒ $\sf{\dfrac{14,50,000}{88,00,000} \times 100}$

⇒ 16.477

⇒ 16.48 %

Therefore,

Return On Investment = 16.48 %